Gasoline Sales in Oregon: 16x7

Gary North

Oct. 19, 2011

One of the most widely held beliefs is that it is good to employ people, so that they will spend money in the community. They want more people working on existing jobs. A make-work economy is a prosperous economy. This belief was widespread in 1850, when Frederic Bastiat wrote his classic essay on the broken window. A broken window creates jobs! So, let us break more windows!

The logic of this position is to believe that labor-saving machinery makes societies poor. The logic of it would ultimately ban backhoes and have people with teaspoons do the digging.

You would think that voters would not believe such a thing these days. But in two states, Oregon and New Jersey, they do believe it. They believe it with an intensity that keeps laws on the books forbidding car owners to pump their own gasoline. The laws have been on the books for 60 years.

Here is the law in Oregon:

480.385 Civil penalty for gasoline dispensing law violations. (1) The State Fire Marshal may impose a civil penalty not to exceed $500 for each violation of any provision of ORS 480.315 to 480.385 or of any applicable rule adopted by the State Fire Marshal.

In 48 states, customers are allowed to pump their own gasoline. In 48 states, filing station attendants no longer exist as a profession. Labor costs are lower. These savings are passed on to customers in the form of lower gasoline prices.

In Oregon, any convenience store that sells gasoline must hire a gasoline attendant. So, there are fewer convenience stores acting as sellers of gasoline. This law restricts entry into the field.

Because there are few customers from 11 p.m. to 7 a.m., it is unprofitable for stations to hire full-time attendants. The solution is to close the stations. When the stations are closed, the manager turns off the pumps. No one can buy gasoline at the station.

Early on Monday morning, October 17, I was taking my rental car back to the airport. I planned to buy gasoline at the one filing station I knew was open in Eugene, home of the University of Oregon. It was closed. A sign was on the door: "We will resume 24-hour service on October 17." But 4:30 a.m. did not qualify as October 17.

I went looking for any open station. I could not find one on the major highways out of the city.

The voters are well aware that they cannot buy gasoline from 11 p.m. to 7 a.m. They have come to accept this as a way of life. They do not understand economics. They do not understand economic cause and effect. The proximate cause: a legislated restriction on pumping your own gasoline. The actual cause: the desire of a cartel in 1951 to restrict entry. The newly invented self-service gasoline industry was only two years old. Lower gasoline prices threatened the profits of the existing operators of filing stations. Notice: we used to call them filling stations -- as though a dollar's worth of gas was not good enough, even at 1951's prices. The service station cartel in Oregon stood firm with Chuck Berry six years later.

Six decades later, the law is still on the books. The voters refuse to repeal it.

Since then, the gasoline industry figured out that the more gasoline it sells, the more money it makes. It has sought to have the Oregon law repealed. In 1982, the voters rejected this repealing legislation.

Back in 1951, the station owners had to come up with reasons to keep the price-cutting self-service stations from entering the market. There had to be a plausible reason -- not just protecting station owners' profits. So, it was done in the name of protecting helpless consumers who would otherwise blow themselves up by pumping gasoline.

In Oregon and New Jersey, it is still 1951. Well, not quite. A minimum-wage guy with a cap with the bill over his neck is your friendly agent. These guys are gone.

Today, all over the United States, people who pump gas do not blow themselves up, but in Oregon they might, or so the Oregon law indicates. The pump technology is not sufficient to protect Oregonians, who are basically children. That, anyway, is what the statute implies. Read it for yourself.

480.315 Policy. The Legislative Assembly declares that, except as provided in ORS 480.345 to 480.385, it is in the public interest to maintain a prohibition on the self-service dispensing of Class 1 flammable liquids at retail. The Legislative Assembly finds and declares that:

(2) Appropriate safety standards often are unenforceable at retail self-service stations in other states because cashiers are often unable to maintain a clear view of and give undivided attention to the dispensing of Class 1 flammable liquids by customers;

(3) Higher liability insurance rates charged to retail self-service stations reflect the dangers posed to customers when they leave their vehicles to dispense Class 1 flammable liquids, such as the increased risk of crime and the increased risk of personal injury resulting from slipping on slick surfaces;

(4) The dangers of crime and slick surfaces described in subsection (3) of this section are enhanced because Oregon's weather is uniquely adverse, causing wet pavement and reduced visibility;

(5) The dangers described in subsection (3) of this section are heightened when the customer is a senior citizen or has a disability, especially if the customer uses a mobility aid, such as a wheelchair, walker, cane or crutches;

(6) Attempts by other states to require the providing of aid to senior citizens and persons with disabilities in the self-service dispensing of Class 1 flammable liquids at retail have failed, and therefore, senior citizens and persons with disabilities must pay the higher costs of full service;

(8) The hazard described in subsection (7) of this section is heightened when the customer is pregnant;

(9) The exposure to Class 1 flammable liquids through dispensing should, in general, be limited to as few individuals as possible, such as gasoline station owners and their employees or other trained and certified dispensers;

(10) The typical practice of charging significantly higher prices for full-service fuel dispensing in states where self-service is permitted at retail:

(a) Discriminates against customers with lower incomes, who are under greater economic pressure to subject themselves to the inconvenience and hazards of self-service;

(b) Discriminates against customers who are elderly or have disabilities who are unable to serve themselves and so must pay the significantly higher prices; and

(c) Increases self-service dispensing and thereby decreases maintenance checks by attendants, which results in neglect of maintenance, endangering both the customer and other motorists and resulting in unnecessary and costly repairs;

(11) The increased use of self-service at retail in other states has contributed to diminishing the availability of automotive repair facilities at gasoline stations;

(12) Self-service dispensing at retail in other states does not provide a sustained reduction in fuel prices charged to customers;

(13) A general prohibition of self-service dispensing of Class 1 flammable liquids by the general public promotes public welfare by providing increased safety and convenience without causing economic harm to the public in general;

(14) Self-service dispensing at retail contributes to unemployment, particularly among young people;

(15) Self-service dispensing at retail presents a health hazard and unreasonable discomfort to persons with disabilities, elderly persons, small children and those susceptible to respiratory diseases;

(16) The federal Americans with Disabilities Act, Public Law 101-336, requires that equal access be provided to persons with disabilities at retail gasoline stations; and

480.320 Use of coin-operated pumps and dispensing of gasoline by self-service declared hazardous. The installation and use of coin-operated dispensing devices for Class 1 flammable liquids and the dispensing of Class 1 flammable liquids by self-service, are declared hazardous. [Amended by 1959 c.73 §1]

I can imagine the scene in 1951 where a few of the Good Old Boys in the legislature sat down with the lawyer of the gasoline station lobby and drew up this list. "That ought to hold the rubes in check!" And a good laugh was had by all . . . for 60 years.

In 1951, the service station -- notice the word service -- cartel thought it could achieve above-market returns on its capital. The economics of a cartel is simple. The members are highly attuned to what will profit them. The general public knows little about the operations of the cartel's economics. The voters have diffuse interests. The cartel's members have highly focused interests: making a profit. They see an opportunity to extract an above-market rate of return on invested capital. They persuade the legislature to pass a law against entry into the market. This lets the cartel's members charge higher prices to customers.

Over time, the cartel may find that greater sales would result from the repeal of the law. Gas stations quit being service stations and became high-priced junk food retailers. The money turned out to be inside the convenience store, not inside the pumps. The pumps are the hook to get buyers into the convenience stores. But the cartel's law in 1951 became a birthright of Oregonians who like to have attendants pump their gas. The voters, not the cartel's members, fear lower-priced gasoline, for that will come at the expense of those words, "Fill 'er up?"

Every state has its own network of cartels that milk their customers by means of cartel-enhancing laws. So does every county. But Oregon's gasoline law is unique. It is like a neon sign that proclaims: Yokels R Us! The voters accept this and revel in it.

Next time you pump your gas for 50 cents a gallon less than they do in Oregon, give thanks that you are not a gasoline yokel. But be assured that a myriad of other cartels in your state and county have made you into some other kind of yokel, several times over.